Allottee cannot be considered as Financial Creditor on Cancellation of Unit by Own Request: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) New Delhi has ruled that if a unit was cancelled at the request of the unit's allottee and the loan used to buy the apartment was paid off with the lending bank, the unit's allottee cannot be regarded as a financial creditor.

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On June 4, 2015, the appellant, Gaurav Jindal received Flat No. C-103 after paying Rs. 29 lakhs.  The UCO Bank paid the corporate debtor Rs. 29 lakhs in full using the loan that the appellant had taken out to pay for the apartment.  The appellant asked the corporate debtor to revoke the allotment and pay back the bank loan amount on February 3, 2018.

The bank filed a complaint against the appellant with the Debt Recovery Tribunal (DRT). The appellant filed a complaint with the Uttar Pradesh Real Estate Regulation Authority (UP RERA) on March 2, 2019, and on August 5, 2019, the UP RERA issued a decree against the corporate debtor for payment of outstanding along with interest. Prior to the DRT, the appellant settled its debts with the bank in 2020, and the bank ordered the withdrawal of OA No.617 of 2018 after receiving the full payment of Rs. 17 lakhs towards the full and final settlement of dues.

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The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor by an order dated 22.03.2021.  The appellant submitted their claim in Form CA on April 6, 2021, together with the RERA order and any supporting documentation.  After asking the Respondent a question, the Appellant resubmitted its claim in Form C.  In 2021, the Successful Resolution Applicant's (SRA) Resolution Plan was accepted.

 In "Vishal Chelani & Ors. vs. Debashis Nanda-Civil Appeal No.3806 of 2023," purchasers have appealed to the Supreme Court, arguing that the Resolution Professional did not treat them as homebuyers despite having a decree from UP RERA.  On October 6, 2023, the Supreme Court granted the appeal, and the appellant and other homebuyers were deemed to be financial creditors.

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The appellant argued that although their claim was recognized as that of a "unsecured financial creditor," they were entitled to the same treatment as a homebuyer. In contrast, the Respondent argued that since the Appellant requested the cancellation of the unit, the claim was legitimately recognized as other creditors.  The Resolution Professional and SRA were not informed of the aforementioned truth regarding the amount that the appellant paid to the bank.  Additionally, it was contended that, in the interest of justice, the money that the appellant paid to the bank should be reimbursed to the appellant from the funds set aside in the resolution plan.

The bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) held that the appellant's unit was cancelled at his own request, and he has filed a claim for the amount paid to the corporate debtor for the unit's allocation as mentioned above. The allocation took place on June 4, 2025, and the corporate debtor received the full amount from UCO Bank that day. The Appellant failed to make any payment to the Corporate Debtor.

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Since the appellant and the bank settled and the appellant paid Rs. 17 lakhs to pay the outstanding balance, there are no bank debts about the unit in question.  The Resolution Professional will make sure that the Rs. 17 lakhs that the appellant paid is reimbursed from the funds set aside in the Resolution Plan, the Tribunal said in dismissing the appeal.

To Read the full text of the Order CLICK HERE

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